D. Waiver and “True” Conditions Precedent

• Author: John D. McCamus
• Profession: Professor of Law. Osgoode Hall Law School, York University
• Pages: 682-688

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The parties to an agreement subject to a non-promissory condition precedent may mutually agree to waive the fulfilment of the condition. Where this is done, the obligations subject to the condition become enforceable. Obviously, a mutual waiver cannot be achieved in cases such as Dynamic Transport Ltd. v. O.K. Detailing Ltd.,³⁶ where the transaction could not close unless the subdivision of the original parcel was effected. The more difficult question is whether there are circumstances in which a unilateral waiver of a condition precedent may be effective. In other common law jurisdictions, it is possible for a party that is the intended beneficiary of a non-promissory condition precedent to unilaterally waive fulfilment of the condition and enforce the obligations of the agreement that were subject to the condition.³⁷The benefited party cannot unilaterally waive, however, if the other party has an interest in fulfilment of the condition that would be prejudiced by waiver. Thus, in Heron Garage Properties Ltd. v. Moss,³⁸a contract for the purchase and sale of land was subject to a condition precedent that planning permission for use of the property as a service station be obtained. The purchaser was unable to waive the condition because the seller retained adjacent property on which he planned to sell cars and thus had an interest in the fulfilment of the condition. In the absence of such an interest in the other party, the party benefiting from the condition is normally entitled to waive its fulfilment. In common law Canada, however, this issue has become much complicated by a doctrine of "true" condition precedent developed by the Supreme Court of Canada in a line of cases beginning with Turney v. Zhilka³⁹in 1959. Although the ambit of the rule established in that case remains uncertain, it is clear that it establishes a uniquely Canadian limitation on the right of unilateral waiver.

The facts of Turney v. Zhilka were uncomplicated. A contract for the purchase and sale of land was subject to the following condition preced-

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ent: "Providing the property can be annexed to the Village of Streets-ville and a plan is approved by the Village council for subdivision."⁴⁰

After inquiries of the village council were made by the purchaser, it became clear that the possibility of annexation was remote. Nonetheless, the purchaser wished to proceed with the purchase and purported to waive fulfilment of the condition precedent. The trial judge held that as the condition was one that had been introduced solely for the benefit of the purchaser, the purchaser was entitled to waive and proceed with the purchase. Although the Supreme Court of Canada expressed doubt about the basis for the factual inference that the condition was for the exclusive benefit of the purchaser, the Court held that, in any event, the decision should be disposed of on "broader grounds."⁴¹Judson J., on behalf of a unanimous Court, briefly discussed cases in which a party benefiting from a promissory condition precedent was held to be entitled to waive performance of the promise. These were described as cases in which "one party to a contract may forego a promised advantage or may dispense with part of the promised performance of the other party which is simply and solely for the benefit of the first party and is severable from the rest of the contract."⁴²The present facts were to be distinguished, however, on the following basis: "But here there is no right to be waived. The obligations under the contract, on both sides, depend upon a future uncertain event, the happening of which depends entirely on the will of a third party - the Village council. This is a true condition precedent - an external condition upon which the existence of the obligation depends. Until the event occurs there is no right to performance on either side."⁴³Noting that neither party has promised that the future uncertain event will occur, Judson J. suggested that this was "an attempt by one party, without the consent of the other, to write a new contract."⁴⁴

It is not entirely clear which of the factors mentioned by Judson J. is the critical indicator of the existence of a true condition precedent. If the doctrine applies whenever the fulfilment of a condition is a "future uncertain event," the doctrine would apply to virtually every nonpromissory condition precedent. If the critical point is that fulfilment is dependent "entirely on the will of the third party," the application of the doctrine is narrowed to some extent though the extent of the

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narrowing remains unclear. If being dependent on the will of a third party means that a decision or action of some kind must be taken by a third party, such as a municipal council or a bank, the doctrine will have a very broad sweep. On the other hand, if the doctrine will not apply where one of the parties must be actively involved in obtaining or provoking the decision or action, the scope of the doctrine will be narrowed. A third possibility is that the key factor is that the "obligations under the contract, on both sides" are subject to the contingency. If this is the test for the application of the true condition precedent doctrine, the test would have the advantage of flexibility. In a case where unilateral waiver appears to be appropriate, a judge could reason, albeit with some circularity, that on the particular facts, the obligations on both sides were not subject to the contingency. To be consistent with Turney v.Zhilka, however, a judge could not...